Indian demand keeping gold:silver ratio in check

The huge demand for silver in India in the light of the government’s specific crackdown on gold is helping the gold:silver ratio stay at levels it might not have managed in times past.

Author: Lawrence WilliamsPosted: Tuesday , 15 Oct 2013

LONDON (MINEWEB) –

The silver price has been holding up remarkably well despite serious weakness in the gold price, which is a bit of an unusual occurrence given that, historically, silver tends to outperform gold on the upside and often dramatically underperform gold when the latter’s price falls.

On this latest occasion, with gold plunging to a little over the $1250 level at the time of writing, silver has indeed fallen, but to around $20.70, whereas the last time gold was at this kind of level back in early August (in fact it was higher) silver was struggling to stay above $19. This means the gold:silver ratio – an avidly followed indicator – is currently sitting at around 60, while back in early August it was closing on 66.

This means that silver has been performing rather better than might have been expected given the current drop in the gold price and silver’s strong underperformance history when the gold price is weak.

Now, over the gold bull market period, the gold:silver ratio has moved between around 84 in 2008, when silver was really out of favour, to as low as 32 when silver peaked at just under $50 in April 2011 before it came crashing back down – with a little aid from some remarkably massive sell orders.

But, to an extent, I digress. Perhaps the biggest market for physical silver, as it has been for gold right up until the current year, is India, and this year India’s silver imports have been surging despite it being subject to the same draconian import duties as its yellow sibling.

Mineweb recently reported that, up until August, India had imported over 4,000 tonnes of silver – a figure, if extrapolated over the full year, would mean India importing over 6,000 tonnes in 2013, over three times last year’s imports of 1,921 tonnes.